New Opportunities: What to Remember About Doing Business in China

Even in the midst of what some are worried could be a trade war, American companies are still doing business in China. While it might not seem easy, knowing a few simple rules about doing business in this country can go a long way.

Here are a few things to remember.

Use First-Hand Experience

The first and most important principle regarding doing business in China is to avoid making assumptions. Whether it’s regarding how your Chinese partners conduct business, how the culture reacts to your products, or what they like about your brand. The best way to find out about what anyone thinks about your products is to go to them.

Take your team on a trip to China. They should go outside the experience of visiting managers and talk to real users of your products. Hold a focus group using real Chinese consumers to see what they like.

If you create a product or service that consumers use at home, visit a real Chinese home to see how average citizens use your items. Register a wechat account and start interacting with customers in the country.

Go off the beaten path and visit a small Chinese city and walk around the countryside. This will give your team a more holistic picture of the whole culture.

Imagine trying to model the entire country from a week spent in Times Square. It would be a strange picture of American culture and consumers.

Think About Competitive Analysis

Chinese firms are often focused on market growth rates when assessing the success of a product or service. Some of them may overlook the basics of competitive analysis for their products and that could cause international firms to suffer.

Make sure that you and your partners realize how many local businesses might be subsidized by local governments. As a foreign partner or foreign investor, you might not benefit from this or might make the firm you’re working with exempt from qualifying for subsidies. When competing with a company that’s receiving subsidies, it could be an uphill struggle.

While strategic investment works in some cases, some Chinese firms rely on foreign investors who cycle through their company. As one investor after the other drops out, another is lined up to take their place. Meanwhile, a local company that is receiving subsidies gets to work at their own pace.

There’s No Need to Rush

While most companies doing business in China seek to hit the ground running, it’s important to plan out your moves. Getting operations going in a foreign country in six months or less puts too much pressure on your staff. You could end up planning out sloppily and not doing enough advance analysis.

You need to find the right partner, not just any partner. It’s important that your goals align with one another. This will ensure negotiations benefit both parties.

Your Chinese partner needs to have ample time to prepare for your work together. Otherwise, you’ll find them using your time constraints against you.

Learn About Collectivism

While some western visitors to China find behavior to be individualist, the truth is that the culture is overall collectivist. This isn’t to be confused with widespread cooperation, however. Cooperation happens within the individual’s own group, family, and co-workers.

Negotiations might not go as planned in a situation like this. Often, negotiations can be zero-sum, where both parties lose out. It’s better to try to impose cooperation hierarchically.

Gathering teams together to work on individual projects is more impactful than trying to get a large group to all move in the same direction. Consider no negotiation as final until any project is finished.

Some Chinese firms may continue negotiations far after you’ve considered a deal to be settled. Don’t be alarmed or offended. While it might seem uncustomary, it can happen and doesn’t mean that a deal is suddenly off.

Behavioral Norms Are Different

Negotiations are a sport in this culture, meaning that things can go much further and seem more aggressive than they would in the U.S. or a western country. Negotiators will exercise their power upfront to assure respect over the course of a long business relationship.

There are firms who might offer a friendly pitch that takes a sudden turn at the end. They might threaten to use their influence to keep your products and services from succeeding in the market if you don’t agree to work together. While this can be very off-putting to westerners, it’s meant to show the seriousness of the offer.

Other firms might even take their guests for a night out on the town, ensuring that they spend a little too much time having fun. Knowing that they won’t be as sharp in the morning, they’ll have a second team handle the negotiations first thing in the AM.

Understand the Role of Government

While it seems that all of the major business decisions in the country are handled by bureaucrats in Beijing, that’s not quite the case. While they steer the ship, overall, each individual province and region makes many of their own rules when it comes to business.

Economic reforms require a decentralization of power, so the government allows for quite a bit of “home rule”. Localities might create their own rules as an experiment for the federal government to use as a test case later.

What this means for doing business is that conditions will vary by region. If you’re running a major operation or doing business that will have contact with Beijing’s offices, contact local offices as well. This will build goodwill locally and ensure that they won’t get in your way if their rules conflict with Beijing’s

Doing Business in China is Too Lucrative to Pass On

While it might feel like doing business in China can be challenging, it’s worth the effort. Not only are you talking about doing business with a billion people, but there’s a lot to learn. Every company has the potential to grow in surprising ways and expanding to China is one way to test your mettle.

If you’re dealing with some of the stresses of running your own business, follow our guide for tips on staying cool.